China comes to India’s defence in WTO debate

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China comes to India’s defence in WTO debate

China comes to India’s defence in WTO debate
Photo credit: Mint

India makes a strong case for discussing barriers imposed by US, European Union and Canada on short term service providers

China was in a large majority of developing countries, including some of the poorest ones, that supported India on Friday at the World Trade Organization for naming and shaming the US, the EU and Canada for continuing to impose regulatory barriers on short-term service providers, especially software professionals.

The barriers cost billions of dollars annually to companies, according to people familiar with the development.

India’s proposal for discussing the escalating regulatory barriers imposed on short-term service providers received support from several groups such as the Africa Group, and the least-developed countries among others.

The US, the EU and Canada, however, took umbrage to India’s proposal on ‘Mode 4: Assessment of Barriers to Entry’, which mentioned the range of barriers imposed by them.

The US said it will oppose any discussion on the Indian proposal at the Council on Trade in Services (CTS) as New Delhi is already pursuing the matter through a trade dispute.

Last month, the US and India held consultations to resolve the issues raised by India in its trade dispute on Mode 4, but the two countries failed to come to any agreement.

The EU said it is disappointed with the Indian proposal as it has allegedly questioned Brussels’ commitment to “multilateralism”. Canada said it would disagree with India since Ottawa does not impose any barriers on short-term service providers, including software professionals.

Other industrialized countries – Norway, Switzerland, Australia, New Zealand and Japan, among others – remained silent during the face-off between the three trade majors on the one side, and India and developing countries on the other.

At a regular meeting of the CTS, India made a strong case for discussing “the increasingly complex nature of barriers to Mode 4 [movement of natural persons of the General Agreement on Trade in Services] entry” urgently.

India underscored the need for preparing a comprehensive report by the WTO secretariat, a suggestion that was supported by China, Turkey and other developing countries.

The barriers mentioned by India include subjective definitions of Mode 4 categories like managers, executives and specialists under the ICT category; non-portability of social security benefits under which contributions made by services providers for social security in the host country cannot be availed of back home when they return; massive increase in visa fees for certain categories; and discriminatory salary thresholds.

According to the Indian proposal presented on 15 March, obstacles to Mode 4 trade include the need to set up shop (commercial presence) in the host country, numerical quotas, economic needs tests, eligibility criteria for visas and work permits (the worldwide costs of processing visa/work permit applications represent 0.3%, according to a WTO report), nationality and residence requirements, and non-portability of social security benefits have rendered market access nearly impossible.

While visa fees in the US have resulted in a massive payment of more than $350 million by Indian service providers, the cumulative contributions made by Indian software and other service professionals in the past six years to the US Social Security System amounted to $8-12 billion.

The US said the issues raised by India on the regulatory barriers to Mode 4 cannot be discussed at the CTS as they already figure in a trade dispute that New Delhi launched more than three months ago.

The EU said it is perplexed by the underlying purpose of the Indian proposal, which can be discussed as part of market access at the Doha negotiating body on services, an African trade diplomat said.

India disagreed with the US by saying that issues such as non-portability of social security benefits and economic needs tests are not being raised in its current trade dispute. Further, the Indian official also clarified that the Mode 4 regulatory barriers can be discussed at the CTS instead of the Doha negotiating body as mandated by trade ministers in paragraph 11 of the Nairobi ministerial declaration, according to the African trade diplomat.

China said the Indian proposal reflected the common concerns of many countries that face similar problems.

The Chinese official maintained that it is important that the WTO secretariat, which had prepared a paper on Mode 4 barriers in the past, must come up with a fresh study.

On behalf of the Africa Group, Morocco said the poorest countries continue to face many regulatory barriers under Mode 4. Morocco said market access commitments in services are undermined when service suppliers from the poorest countries are subjected to burdensome and lengthy procedures. The African group, according to Morocco, has a “systemic” interest in the Mode 4 discussion.

Despite vehement opposition from the US, the EU, and Canada, India succeeded in ensuring that the issues raised through its proposal on Mode 4 barriers remained very much on the table for the CTS meetings, the African official pointed out.